Q1 Weak But Inline on Sales; Next 1.5 Months are Critical for SNBR

Research evidence excerpt

Q1 Weak But Inline on Sales; Next 1.5 Months are Critical for SNBR

C O M PA N Y N O T E

M a y 1 2 , 2 0 2 6

Sleep Number Corp. (SNBR) Neutral

CONCLUSION PRICE: US$2.45

We maintain our Neutral rating and lower our PT to $3 (still 7.5x 2026 EBITDA) following TARGET: US$3.00

a challenged Q1, and with uncertainty ahead. Qualitatively, SNBR is executing its plan: 7.5x 2026E EV/EBITDA of $89.3M (assuming

the entire product line has been refreshed, media spend has normalized (and will be up $600M net debt and 23.0M diluted s/o)

y/y in Q2), and new ad content aligns with the new products. Quantitatively, Q1 was still

abnormally weak with SSS at -16% despite help from clearance activity, Q2 appears to be Peter J. Keith

Sr Research Analyst, Piper Sandler & Co.

a little weak to start (from lapping promo activity), and much is riding on the Memorial Day 212 284-5040, peter.keith@psc.com

selling period to drive positive SSS for the quarter. And SNBR needs to refinance its capital Alexia Morgan

structure by June 30th or face covenant violations (and potential bankruptcy). While the Research Analyst, Piper Sandler & Co.

mattress industry appears to have positive momentum going into the holiday selling period, 212 284-9551, alexia.morgan@psc.com

the macro-economic backdrop clouds the outlook. Sarah Morin

Research Analyst, Piper Sandler & Co.

• What Happened? SNBR reported a Q1 adj. EBITDA miss of $5.8M (vs. cons $15.7M); 312 281-3446, sarah.morin@psc.com

GAAP EPS came in at -$2.19. Results were driven by revenue -18.9% y/y to $319M Changes Previous Current

(vs. cons $320.7M) and comp -16% (cons -13%). GM as a % of sales was 57.9% or Rating — Neutral

-330bps y/y, compared to Street's 58.9% (due to clearance activity and mix). Adj. EBIT Price Tgt US$5.00 US$3.00